RUSSOFT Association

1
RUSSOFT Association

• RUSSOFT
• Baltic Cruise 2006
• Valentin Makarov, president of RUSSOFT
• www.russoft.org

2
RUSSOFT

• RUSSOFT is the major Association of 80 leading
  software development companies from Russia,
  Byelorussia and Ukraine with more than 7000
  software engineers
• Part of the Russian Information and Computer
  Industry Association (APKIT)
• Leadership in implementing CMMI/ISO standards in
  the Industry
• Organizer of marketing and PR activities in
  Russia and abroad together with Fort Ross Ltd
  (its marketing Agency)
• Active lobbyist of IT interests in the Russian
  Government
• RUSSOFT supports its IT-parks projects in St
  Petersburg, Nizhniy Novgorod, Novosibirsk, Moscow
  area

3
Our members

• According to a recent research by Global Services
  and NeoIT, four RUSSOFT members EPAM Systems,
  IBA, Luxoft, Auriga - hold leading positions
  among all IT services providers from Central and
  Eastern Europe (January 2006)
• Among RUSSOFT members - Intel, HP, Sun
  Microsystems as well as 80 big, mid-size and
  small companies from the CIS

4
Major events supported by RUSSOFT and Fort Ross

• ROSS (Russian SoftwareOutsourcing Summit) -
  2001-2005 (www.soft-outsourcing.com)
• Stand at CEBIT 2001-2005
• Stand at Comdex Scandinavia 2002-2003
• Russian CIO Summit (2003-2004) www.cio-summit.ru
• Russian IT Seasons (2002-2005) www.it-seasons.ru
  )
• President Gorbachev speaking at Massachusetts
  Software Council Annual meeting (April 2005)
• Open Source Forum Russia 2005 (www.opensource-foru
  m.ru)
• Software Engineering Congress (www.secr.ru)
• ExecutEve (exclusive B2B meeting with CIOs and VP
  of Fortune 500 companies)
• 3rd US-Russia Technology Symposium (Stanford)

5
Analytical Activities

• Data-base of Russian speaking software companies
  (www.russoft.org)
• Annual report on the Russian software export
  market (www.russoft.org)
• On-demand studies of Russian speaking markets
  (vertical segments, labor availability, prices,
  new technologies, trends, etc.)
• White Paper on Russian Outsourcing
  (www.russoft.org)

6
International Cooperation Agreements with

• BITKOM (Germany)
• Massachusetts Software Council (US)
• Connecticut Technology Council (US)
• Software Association of New Hampshire (US)
• Vermont Chamber of Commerce (USA)
• US-Russia Chamber of Commerce of New England
  (USA)
• Israel Association of Electronics and Information
  Industries - IAEII

7
Lobbying Activities

• Active participation in formulating the
  Conception of the Russian IT-market development
  (approved by the Government in November 2004)
• Successful support to changes in the legislation
  (Customs procedures, Tax Code, Central Bank
  currency control regulation)
• Active support to the IT-Parks projects in St
  Petersburg, Moscow area, Nizhniy Novgorod,
  Novosibirsk)
• Preparation of a Program of measures for
  enhancing the IT-education. Productive
  cooperation with Universities and private
  Training Centers

8
Anticipated areas of IT cooperation with Russia

• Tragedies in New York, Moscow and Beslan evoke
  urgent needs for joint IT projects devoted to
  antiterrorist issues (including biometrics and
  information security)
• Outsourcing of HiTech solutions to Russian
  companies, creation of dedicated swd centers
• Joint RD projects aimed at designing new
  products and services for the Global market
• Joint activity on the Russian market, including
  the eRussia program
• Investments in the promising Russian businesses
  and in the RD infrastructure (IT-incubators and
  IT-parks)

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What may RUSSOFT do for you?

• Study the Russian market, make a screening of
  service providers or of new products
• Organize due diligence of chosen companies
• Organize specialized events for promoting your
  technologies among Software companies in the
  former SU
• Assist your accession to Federal and local
  governments and to their IT programs
• Facilitate communication with regional customers
  in Russia, Ukraine and Byelorussia through our
  network
• Promote your company via sponsorship within
  numerous events in Russia and abroad
• Mobilize Industrys resources for solving
  strategic tasks of Russian and Global Economy

10
General data on the Russian Software Development
Outsourcing

• RUSSOFT
• Baltic Cruise 2006
• Valentin Makarov, president of RUSSOFT
• www.russoft.org

11
IT Outsourcing size. Outsourcing Destinations
Countries 2004. Source - neoIT

• India 12,2 B
• Canada 8,2 B
• Ireland 2,2 B
• China 700 M
• Russia 550 M (practically only software
  development outsourcing)

• Philippines 330 M
• South Africa 220 M
• Brazil 200 M
• Malaysia 120 M
• Poland 110 M
• Mexico 100 M
• Check Republic 60 M
• Hungary 50 M
• Romania 30 M

12
Estimations of the total software export from
Russia, 2002-2006
13
Key market destinations (data from the report of
RUSSOFT and OUTSOURCING-RUSSIA, 2005)
14
Geography
15
Russian software export, 2004
16
Export market of software products

• On-line sells - through Internet (mainly through
  Digital River).
• Estimations of export - 70Mio-100Mio (2004)
• Off-line sells through direct sells and through
  distribution channels.
• Estimation of export - 40Mio-55Mio (2004)
• Main markets for on-line sells USA (50), EU
  (35), Eastern Europe (10), Asia (5)
• Source Independent Software Developers
• Forum

17
Strategic advantages of the Russian Software
Development Industry main features of the
Ecosystem

• Strong in-depth educational system
• Profound scientific knowledge
• Genetic memory of handling complicated RD
  projects during the Cold War
• Inherent creativity and ability of engineering
  innovations
• Adherence to the Agile Programming approaches and
  to modern QA standards
• Open-mindedness and fairness
• Ability to work in a team Team-sourcing
• Very low attrition rate (5-16)

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Annual ACM International Collegiate Programming
Contests

• 2000World Champions St. Petersburg State
  UniversitySilver Medal St. Petersburg Institute
  of Fine Mechanics and Optics Among winners
  Moscow State University, Novosibirsk State
  University
• 2001World Champions St. Petersburg State
  University
• Gold Medal St. Petersburg Institute of Fine
  Mechanics and Optics
• Among winners Moscow State University, Ural
  State University, Southern Ural State University
• 2002
• World Champions Shanghai Jiao Tong University,
  China
• Silver medals Saratov State University
  (European Champions),
• Among 10 winners Moscow State University, St.
  Petersburg Institute of Fine Mechanics and Optics
  
• 2003
• World Champions Warsaw State University
• Gold medals Moscow State University, St
  Petersburg State University of Fine Mechanics and
  Optics
• Silver medals Saratov State University
• 2004
• World Champions St Petersburg State University
  of Fine Mechanics and Optics
• Gold medals Belorussian State University,
  Penza State University
• Silver medals Izhevsk State University
• 2005
• World Champions Shanghai University of Robotics
• Gold medals Moscow State University, St
  Petersburg State University of Fine Mechanics and
  Optics

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Revolutionary changes in the QA

• First in Russia CMMI Level 3 certified (member of
  RUSSOFT)
• First in Europe CMMI Level 4 certified (member of
  RUSSOFT)
• First in Europe CMMI Level 5 certified (member of
  RUSSOFT)
• 3 companies CMM(CMMI) Level 4 certified (2
  members of RUSSOFT)
• More than 20 companies ISO 9001/2000 certified
  within a project supported by the State
  Foundation for SME support
• First in Russia Governmental Award for Quality
  awarded to a software company (member of
  RUSSOFT)
• September 2003 Fort Ross Consortium (now
  RUSSOFT) got status of the Russian Chapter of
  the QAI USA within the Quality Days in St
  Petersburg
• Since 2001 - Strategic Cooperation between Fort
  Ross (now RUSSOFT) and QAI India

20
New Challenges (2003)

• Growth of the Industry meets significant
  problems of low support from the Government.
  Following areas are crucial for development
• - adjustment of the IT education to the needs
  of the IT Industry,
• - support to the international marketing and PR
  of the Industry,
• - deregulation of the software export is the
  key issue for the growth (simplification of VAT
  refund, elimination of customs barriers,
  simplification of currency control)
• - cut of social taxes (the major indirect tax),
• - creation of modern infrastructure (network of
  the regional IT-parks) is the foundation of the
  Innovative IT Industry

21
Strategic Changes in the State approach to the
Russian Software Development Industry.

• RUSSOFT
• Baltic Cruise 2006
• Valentin Makarov, president of RUSSOFT
• www.russoft.org

22
RUSSIAN IT MARKET DEVELOPMENT SCENARIOS

• Russian IT market value
• USD Bln.

• ??

• CAGR

• As Usual scenario supposes gradual decrease of
  market growth while it saturates with imported IT
  products to 15 of CAGR (2005 2010)
• Proactive government support to local IT
  production should support market growth at 30
  CAGR

• 30

• 15

• 2002

• 2003

• 2004(E)

• 2010(F)

Sources IDC
23
Index of the Governmental support to the Russian
IT industry (forecast of 2003)
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Conception of the Russian IT market development
approved by the Government on November 18, 2004
(1)

• Deregulation of the IT export market (diminishing
  of bureaucratic barriers in tax and customs
  regulation, in export control)
• Support to the international marketing of Russian
  IT companies and to their QA systems
  certification
• Internal market growth initiatives and support
  measures (computer for everybody, stimulation
  of IT consumption, etc.)

25
Conception of the Russian IT market development
approved by the Government on November 18, 2004
(2)

• Support to creation of IT-parks network
  (application of special economic zone regime,
  assistance to obtaining rights on land on the
  regional level, allocation of State investment in
  infrastructure, cut of taxes in IT-parks)
• Creation of State owned Investment Fund for IT
  business development
• Enhancement of IPR Protection system in IT

26
First results of realization of Conception (1)

• Adjustment to the Tax Code has been approved,
  which provides legal basis for exemption of VAT
  for exporters of software outsourcing services
• Low on Special Economic Zones has been approved
  and a set of projects have been initiated in 4
  regions
• Customs regulation of software export has been
  simplified

27
First results of realization of Conception (2)

• Program of a network of IT-Parks has been
  prepared by the Ministry of ITTelecom
• Project of a mixed State/Private IT-Investment
  Foundation was initiated by the Ministry of
  ITTelecom
• Draft of a Low on applying of a simplified and
  diminished taxation to software exporting
  companies has been initiated in the State Duma

28
Distributed IT-park of St Petersburg

• Proposal from the RUSSOFT Association
• Baltic Cruise 2006
• Valentin Makarov, President of RUSSOFT
• www.russoft.org

29
Conception of the distributed St Petersburg
IT-Park

• Why distributed?
• City has a huge territory, so one center can not
  offer optimal logistics and construction cost
• Educational Centers (which are essential for
  success of an IT-park) are distributed on its
  territory
• City is interested to have an even distribution
  of high-tech facilities and of educated
  population on its territory

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How it will function?

• Each project is financially independent, while
  there is a Coordinating Council (CC) which keeps
  balance of interests of participating IT-Centers
  projects
• CC will represent and defend joint interests of
  participating projects in the State (on Federal
  and local levels), such interests as State
  investment, tax and customs incentives, etc.
• CC will govern some joint projects (such as the
  VC Fund for investing SMEs in incubators, a joint
  PR campaign, etc.)
• The IT-Park is open for new projects which will
  fit requirements to the IT-Center

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What we did achieve so far

• Memorandum on understanding was signed by four
  participating projects of IT-Centers
• Ministry of ITCommunication has agreed on
  Conception of Coordinating Council and on
  distributed IT-Park in St Petersburg
• The Scientific Council of St Petersburg has
  approved the Conception of the distributed
  IT-Park of St Petersburg

32
IT-Center of the St Petersburg Center of Academy
of Science
IT-Center of RUSSOFT
IT-Center of GOI-ITMO
IT-Center of the Telecom University
IT-Center of the State University
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Composition of an IT-Center

• Center of applied training, which acts in
  cooperation with the main Universities (State
  University, Electrotechnical University,
  University of IT, Mechanics and Optics,
  Polytechnic University)
• SPIN St Petersburg Incubator for innovative
  SMEs (40-50 SMEs in IT sector) coupled with
  Seed-money VC Fund (created jointly by private
  and State investments)
• RD Centers of middle-size and big Russian and
  international companies
• Offices of foreign IT companies intended to
  explore Russian market
• Servicing companies offering marketing, PR,
  sales, training, legal advice, etc.

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What is offered to international business?

• Participation in fund-rising (55 Mio of total
  investment), including direct investments
  (20-25) and loans
• Participation in the management of the IT-Center
  through acquiring shares (f.ex. in the
  Northern IT-Park Ltd up to 75 of the share
  capital is available for investors)
• Participation in creation and in the management
  of the Seed-money VC Fund for the Incubator
  project (with participation of State money)
• Accommodation of offices of foreign companies
  willing to explore the Russian IT market
• Joint activity for acquiring status of the
  Special Economic Zone (with corresponding
  incentives in Customs and Tax regulation)

35
Anticipated international partners

• Managing companies of the IT-Parks (f.ex.
  Technopolis, Finland) - for co-managing the
  IT-Center
• Banks and Financial Institutions - for investing
  into construction (also a Bank office is planned
  to be settled in the IT-Center)
• Seed-money VC Funds for investing in the SMEs
  in the SPIN-Incubator
• IT companies - for renting space in the IT-Center
• Consulting companies for servicing the
  residents of the IT-Center